Sunday, June 11, 2017

Getting a credit card straight out of college

The Credit Card Plan

The times when credit cards were given out to college freshmen like Halloween candy are gone. College students don't qualify any more for credit cards.

As our children entered college, we quickly discovered that there's some work to do to keep them financially safe but able to use money as needed without too much hassle.

We considered a debit card, but instead we chose to open a credit card in our name (or use an existing one) and make our college student an authorized user. We did this for a few reasons:

  1. Credit cards are safer than debit cards
  2. Being an authorized user on a credit card helps build credit
  3. We had no worries about our kids over-spending. They are trained to pay the card in full each month from their checking account, and our deal with them is that they would be paying us back for college, so they were careful about how much money was going on their "tab."

The outcome after college

Here's a summary of how this panned out with each of our children. I'll start by saying that making them authorized users was a good idea, and it went smoothly all through college. But after college, obtaining a credit card is still hard to do.

Kid One

After college, Kid One decided to get a debit card. To stay safe, she uses two checking accounts. The one connected to the debit card has only a small amount of money in it. That way, if her debit card is compromised, and she is unable to fully recover the charges, she won't lose much. She keeps an eye on it, and moves money into the account as needed.

Kid Two

After college, Kid Two applied for a credit card. She showed them the offer letter for her job, informed them of her starting salary, and provided all the documents they asked for. They never asked about authorized user, but we all thought that would show up in her credit report. And given that she had a good job straight out of college, we expected the application to be accepted but it wasn't. The letter said she was rejected because she didn't have enough revolving credit, even though her credit score was high.

So we helped her come up with a list of questions and further information to take with her to the bank. Lo and behold, the bank took a second look. The bank rep made the decision to update her first application rather than start over with a new application. He explained that applying and getting rejected hurts your credit score, and he wanted to avoid that.

He called the credit department and pointed out that he has a customer here who just opened a checking account with a wad of money (our graduation gift to her) and that she really needs to be given a second look for a credit card. 

Then he put her on the phone directly with the credit department. The credit department rep took an interest in her having been an authorized user. He asked her how many years she had the card, and whether she had been the one responsible to pay it (yes) and whether she had been paying it in full each month (yes).

We are now waiting to see if she is issued the card. If she is not, then she will have to open some store cards to help her build credit, and maybe reapply in six months or a year after she's been working a while. Or she could probably arrange for us to be co-signers, but we didn't immediately go for that because the bank she had chosen doesn't offer cards with co-signers. She would have to switch banks.

Kid Three

Kid Three is still in college. He is using the credit card just as the other two did. It gets paid in full each month from his own checking account, and, just as with the other two, whenever the checking account gets low, we transfer more in, and put that amount on his "tab."

We learned from experience to get him started with Credit Karma. As a result, his use of our card as an authorized user is already on record.

He periodically checks on his Credit Karma account, and so do we. We look for nefarious activity, but also we see he is starting to get credit card offers. Those offers are easy to apply for, so once he graduates and is working, start there.

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